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A close
up on telecom taxes A long time ago, when there were only post-paid cellular phone lines, text messaging was charged a flat fee regardless of how many lines winged to and fro satellite relay stations. This started the addiction of "texters," so much so that the Philippines quickly got to be known as the text capital of the world. Soon, with all that frenzy over virtually free "texting," the system became so congested that telecommunication companies introduced the current P1 per text charge. "This saved the industry," claims one telecom executive, referring to the bad image that the industry was getting over jammed lines. But this act not only "saved the industry," it is also the reason for the unprecedented profit performance that the two industry stalwarts Globe Telecom Inc. and Smart Communications Inc. now enjoy. In fact, other new companies including Sun Cellular are dying to get a piece of this lucrative pie. During the first half of the year alone, Globe – owned by Ayala Corp. and Singapore Telecom – reported a net income of almost P7 billion. Smart, the cash cow of Philippine Long Distance Telephone Co., earned almost twice that at P11.6 billion, allowing PLDT to register a record-breaking P12 billion profit during the same period, and eclipsing its full 2003 earnings of P11.2 billion. Still Growing Market In 2001 when higher charges on "texting" were introduced on the pretext of decongesting the system and reducing nuisance text messages, there were already 12 million "texters." Then, the number of subscribers was forecast to reach "a phenomenal base of 20 million" by 2004. Today, less than three years since the P1-per-text rate was introduced, the Philippines has become a 27-million strong "texting" nation. Yes, thanks to the very same "texters" who scrimp over their meager salary, sometimes skipping meals, just so they would have the money to buy a new mobile handset or simply to pay for a P25 load. And what do loyal subscribers get in return? Whenever government raises the specter of new taxes on the telecommunication giants, the industry without batting an eyelash simply turns around and threatens (or promises?) that any new taxes will be passed on to the subscribers. There is no argument that taxes are legitimate business costs that the consumer will ultimately have to bear, But rather than just smugly say "additional costs will be passed on," why don’t rich telecoms say, "before we do that, let’s improve our efficiency and lower operating cost so any new tax passed on will not increase rates to subscribers." Or is this asking too much from the fat cats? Want to know what some costs to subscribers can be cut down? Continuing Dropped Calls Up to now, millions still suffer from dropped calls, or calls that are without reason terminated by the network. Dropped calls are a reflection of the telecommunication company’s inefficiency, and yet the victimized subscriber still has to pay for it. Just imagine if just half of the number of the wireless users would be victimized by a dropped call once a month. This would already entail about P100 million in revenues for the industry. In a year, this could easily chalk up to P1.2 billion. A National Telecommunications Commission circular to address the unfair charges on dropped calls was opposed by the telecoms giants. Obtaining a court order, they stopped NTC from implementing the stoppage of these unfair charges on dropped calls. Costly Short Expiry Dates The same NTC circular that telecoms were able to scuttle also called for the extension of SIM and pre-paid cards’ validity. With the introduction of pre-paid loads, this expiry is even shorter. A P20 Pasa Load or Share-A-Load, for instance, is good for only a day. If you are a clueless novice subscriber, you would try to scrimp on the load that you bought or was given, only to find out the credit had disappeared after 24 hours. Re-Directing Lobbyists Efforts Ironically, interest groups like Txt Power focus their action against any and all tax on the telecom sector, and even initiate text campaigns against prominent lawmakers that inadvertently means more revenues for Globe and Smart. Instead of just opposing taxes, maybe these interest groups should re-direct efforts and press telecom firms to plow back profits to radically improve efficiency and cut costs so new taxes need not increase rates passed on to customers. The two cost items described above are good starters. Contending With Realities Due to the popularity of text messaging, which is indeed, one of the cheapest forms of communication in this country, the government was forced to abandon the planned levy on texting and explore other options like reimposing the franchise tax based on gross sales through two bills filed in the Lower House by Rep. Danilo Suarez and Rep. Eric Singson. Telecom companies (more so the ones with big revenues) are reportedly more in favor of an increase in the Value Added Tax (VAT) and are convincing the government that it would collect more from higher VAT charges than with the franchise tax. But beware! There could a catch here. These companies may have a lot of VAT credits that in the end no VAT can be collected from them. The realities are clear: the government needs revenues, the telecom companies are wallowing in profits, consumers are scrimping on more basic items to have a text load. There must be a way by which profits of telecoms can be channeled to reduce operating costs to such an extent that additional taxes can be imposed without increasing the rates to users. Finding it is a difficult but critical task for the moment. ‘Breaking Barriers’ with Winston Garcia, GSIS president and GM "Breaking Barriers" on IBC-TV13 (11 p.m. every Wednesday) will feature Winston Garcia, GSIS president and general manager, on Wednesday, 13th October 2004. As far as Winston Garcia is concerned, the best way to respond to allegations of mismanagement is to demonstrate the strong financial results achieved by GSIS under his stewardship and the reforms initiated to improve operations and enhance member service support. Detractors, however, disregard good performance and instead simply focus on what they consider as improprieties on the part of the chief executive of GSIS. It is disturbing to note how easy it is to besmirch the name and reputation of a person, particularly if media gives premium to stories about scandals and anomalies involving public officials. Their license is the need for transparency for all actions of those holding positions with public trust. This is well and good, and ideal. But what if media, knowingly or unwittingly, is being used as a weapon of destruction to put down a person, an organization or an idea for another’s gain? Of course, two can play the game. But where does this all end? One can only expect an endless drama of character assassination, allegations, counter allegations, and mudslinging. In the meantime, the person being attacked is paralyzed, the organization is stymied, and the public in need of service suffers. Worse, the more critical problems are set aside. Are you still wondering why the country is in such a critical situation, economically and morally? Why we cannot get out of this quagmire? Watch it. Pre-Need Industry Update On TV "Isyung Kalakalan at Iba Pa" on IBC News (4:30 p.m. and 10:30 p.m., Monday to Friday) starts today with an update of issues that continue to affect the pre-need industry. Years of poor government regulation over pre-need companies have caused a plethora of problems during the last decade. In trying to correct the situation, tougher strictures were imposed on this sector during the last few years. But these well-meant efforts may be too late. Even then, the legislature is batting for the passage of a more comprehensive pre-need code of conduct to avoid past costly mistakes and give pre-need policyholders better protection. Watch it. Should you wish to share any insights, write me at Link Edge, 4th Floor, 156 Valero Street, Salcedo Village, 1227 Makati City. Or e-mail me at reygamboa@linkedge.biz. If you wish to view the previous columns, you may visit my website at http://bizlinks.linkedge.biz.
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